CONDENSED INTERIM CONSOLIDATED FINANCIAL … · 2020. 12. 21. · 2 BELO SUN MINING CORP. NOTICE OF...

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

for the three months ended March 31, 2012 and 2011

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BELO SUN MINING CORP. NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor. The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these condensed interim consolidated

financial statements in accordance with standards established by the Canadian Institute of Chartered

Accountants for a review of interim financial statements by an entity’s auditor.

- See accompanying notes to these Condensed Interim Consolidated Financial Statements - 3

Condensed Interim Consolidated Statements of Financial Position

unaudited

(Expressed in Canadian dollars)

March 31, December 31,

Notes 2012 2011

Assets

Current assets

Cash and cash equivalents $ 35,914,183 $ 32,415,945

Prepaid expenses and sundry receivables 3 625,869 392,823

36,540,052 32,808,768

Non-current assets

Property, plant and equipment 6 1,169,980 1,146,689

Term investment 5 562,475 548,968

Total Assets $ 38,272,507 $ 34,504,425

Liabilities and Equity

Current liabilities

Accounts payable and accrued liabilities 7 2,971,341$ 2,164,777$

Finance leases 8 44,116 60,264

Current taxes 17 7,091 7,091

3,022,548 2,232,132

Non-current liabilities

Finance leases 8 - 6,481

Deferred taxes 17 7,091 14,182

3,029,639 2,252,795

Equity

Share capital 9 109,369,909 96,276,107

Share -based payments reserve 10 9,186,970 8,782,612

Accumulated other comprehensive loss (429,702) (99,707)

Deficit (82,884,309) (72,707,382)

Total Equity 35,242,868 32,251,630

Total Liabilities and Equity 38,272,507$ 34,504,425$

Commitments and contingencies 16

Subsequent events 18

Approved on behalf of the Directors:

"Peter Tagliamonte" "Mark Eaton"

Director Director

Belo Sun Mining Corp.


Condensed Interim Consolidated Statements of Comprehensive Loss

unaudited


2012 2011

Expenses

Management fees paid to directors 15 $ 93,002 $ 182,979

Salaries, wages and consulting fees 316,486 649,341

Legal fees - 7,183

Audit fees 990 13,540

General and administration 685,034 392,763

Amortization 44,434 27,230

Share based payments 10 2,741,300 -

Exploration and evaluation expenses 4 4,805,280 3,142,639

Engineering studies 4 2,560,037 161,903

Foreign exchange (gain) (638,252) (51,737)

Loss from operations (10,608,311) (4,525,841)

Interest income 416,644 88,590

Net loss for the period before taxes (10,191,667) (4,437,251)

Exchange differences on translating foreign operations (329,995) (45,382)

Comprehensive loss for the period $ (10,521,662) $ (4,482,633)

Loss per share 12

Basic $ (0.05) $ (0.03)

Diluted $ (0.05) $ (0.03)

Weighted average number of shares outstanding:

Basic and diluted 216,689,913 154,719,106

Diluted 216,689,913 154,719,106


Notes

Three months ended March 31,


Condensed Interim Consolidated Statements of Cash Flows

unaudited


2012 2011

Cash provided by (used in) operations:

Net (loss) $ (10,191,667) $(4,437,251)

Items not involving cash:

Share based payments 11 2,741,300 -

Amortization 44,434 27,230

Interest income (416,644) (88,590)

Unrealized loss/(gain) on foreign exchange (405,165) (20,095)

Interest income received 405,592 69,799

Working capital adjustments:

Change in prepaid expenses and sundry receivables (233,046) (234,750)

Change in accounts payables and accrued liabilities 806,564 1,150,402

Change in income taxes (7,091) (7,091)

Net cash used by operating activities (7,255,723) (3,540,346)

Investing activities

Expenditures on property, plant and equipment (89,719) (112,448)

Net cash used in investing activities (89,719) (112,448)

Financing activities

Proceeds from issuance of shares / units - 51,842,000

Share issuance costs - (3,321,310)

Exercise of warrants/options 10,771,600 2,286,090

Lease payments (23,751) -

Net cash provided by financing activities 10,747,849 50,806,780

Change in cash and cash equivalents 3,402,407 47,153,986

Cash and cash equivalents, beginning of the period 32,415,945 7,127,226

Effect of exchange rate on cash held 95,831 -

Cash and cash equivalents, end of the period $ 35,914,183 $54,281,212

Cash and cash equivalents are comprised of:

Cash in bank $ 17,151,068 $52,067,978

Short-term money market instruments $ 18,763,115 $ 2,213,234

$ 35,914,183 $54,281,212



Notes



Condensed Interim Consolidated Statements of Changes in Equity

unaudited


Number

of Shares Share Capital

Share-

Based

Payments

Reserve

Accumulated

Other

Comprehensive

(Loss)

Retained

Earnings

(Deficit) Total

Balance, December 31, 2011 207,604,334 $ 96,276,107 $8,782,612 $ (99,707) $(72,707,382) $32,251,630

Exercise of stock options 275,000 160,750 - - - 160,750

Valuation allocation on exercise of stock options - 91,117 (91,117) - - -

Exercise of warrants 21,515,600 10,610,850 - - - 10,610,850

Valuation allocation on exercise of warrants - 2,231,085 (2,231,085) - - -

Valuation allocation for expiry of warrants - - (14,740) - 14,740.00 -

Comprehensive (loss) - - 2,741,300 (329,995) (10,191,667) (7,780,362)

Balance, March 31, 2012 229,394,934 $109,369,909 $9,186,970 $ (429,702) $(82,884,309) $35,242,868

Balance, December 31, 2010 149,158,834 $ 40,829,667 $6,401,610 $ (118,627) $(39,933,424) $ 7,179,226

Public offering (Note 10) 45,080,000 51,842,000 - - - 51,842,000

Share issuance costs - (3,321,310) - - - (3,321,310)

Exercise of stock options 1,451,000 857,340 - - - 857,340

Valuation allocation on exercise of stock options - 666,913 (666,913) - - -

Exercise of warrants 3,282,500 1,428,750 - - - 1,428,750

Valuation allocation on exercise of warrants - 334,735 (334,735) - - -

Comprehensive (loss) - - - (45,382) (4,437,251) (4,482,633)

Balance, March 31, 2011 198,972,334 $ 92,638,095 $5,399,962 $ (164,009) $(44,370,675) $53,503,373

Belo Sun Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements March 31, 2012 and 2011 (Expressed in Canadian dollars unless otherwise noted)

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1. Nature of operations Belo Sun Mining Corp. (“Belo Sun” or the “Company”), through its subsidiaries, is a gold exploration company engaged in the exploration of properties located in Brazil. The Company is a publicly listed company incorporated in the Province of Ontario. The Company’s shares are listed on the Toronto Stock Exchange. The Company’s head office is located at 65 Queen Street West, 8th Floor, Toronto, Ontario, Canada, M5H 2M5. Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company's title. Property title may be subject to unregistered prior agreements, unregistered claims, aboriginal claims and non-compliance with regulatory and environmental requirements. The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of interests in mineral properties and the Company's continued existence is dependent upon the preservation of its interests in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or the ability of the Company to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. Changes in future conditions could require material write-downs of the carrying values. The Company's mining assets that are located outside of North America are subject to the risk of foreign investment, including increases in taxes and royalties, renegotiation of contracts, expropriation and currency exchange fluctuations and restrictions. 2. Significant accounting policies a) Statement of compliance These condensed interim consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The policies applied in these condensed interim consolidated financial statements are based on International Financial Reporting Standards (“IFRS”) issued and outstanding as at March 31, 2012. The policies as set out in the Company’s Annual Consolidated Financial Statements for the twelve months ended December 31, 2011 were consistently applied to all the periods presented unless otherwise noted below. The Board of Directors approved these condensed interim financial statements for issue on May 11, 2012. b) Basis of preparation These financial statements were prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies.


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c) Future accounting changes Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning after January 1, 2013 or later periods. Updates are not applicable or are not consequential to the Company have been excluded thereof. IFRS 9, Financial Instruments: Classification and Measurement, effective for annual periods beginning on or after January 1, 2015, with early adoption permitted, introduces new requirements for the classification and measurement of financial instruments. Management anticipates that this standard will be adopted in the Company's financial statements for the period beginning January 1, 2015, and has not yet considered the potential impact of the adoption of IFRS 9. IFRS 10, Consolidated Financial Statements, establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. This standard (i) requires a parent entity (an entity that controls one or more other entities) to present consolidated financial statements; (ii) defines the principle of control, and establishes control as the basis for consolidation; (iii) sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee; and (iv) sets out the accounting requirements for the preparation of consolidated financial statements. IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation—Special Purpose Entities and is effective for annual periods beginning on or after January 1, 2013, with early application permitted. IFRS 11, Joint Arrangements, establishes the core principle that a party to a joint arrangement determines the type of joint arrangement in which it is involved by assessing its rights and obligations and accounts for those rights and obligations in accordance with that type of joint arrangement. This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted. IFRS 12, Disclosure of Involvement with Other Entities, requires the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted. IFRS 13, Fair Value Measurement, defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except for: share-based payment transactions within the scope of IFRS 2 (Share-based Payments); leasing transactions within the scope of IAS (17 Leases); measurements that have some similarities to fair value but that are not fair value, such as net realizable value in IAS 2 (Inventories); or value in use in IAS 36 (Impairment of Assets). This standard is effective for annual periods beginning on or after January 1, 2013, with early application permitted.


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IFRIC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine was issued by the IFRIC in October 2011. IFRIC 20 applies to all types of natural resources that are extracted using the surface mining activity process. IFRIC 20 may represent a change in accounting practice for some Canadian mining entities. Specifically, IFRIC 20 permits capitalization of stripping costs if all of the following three criteria are met:

• probability of future economic benefit (improved access to the ore body) flowing to the entity;

• identifiability of the component of the ore body for which access has been improved; and

• measurability of the costs associated to the stripping activity.

Furthermore, where the costs of the stripping activity asset and of the inventory produced are not separately identifiable, IFRIC 20 provides a more detailed cost allocation guidance based on a relevant production measure that allows allocation between inventory produced and the stripping activity asset. IFRIC 20 is effective for annual periods beginning on or after January 1, 2013. Early application is permitted.

IAS 1, Presentation of Financial Statements (“IAS 1”), has been amended to require entities to separate items presented in other comprehensive income (“OCI”) into two groups, based on whether or not items may be recycled in the future. Entities that choose to present OCI items before tax will be required to show the amount of tax related to the two groups separately. The amendment is effective for annual periods beginning on or after July 1, 2012 with earlier application permitted. The Company has not yet determined the impact of the amendments to IAS 1 on its financial statements.

d) Principles of consolidation

(i) Subsidiaries

All entities, in which the Company has a controlling interest, specifically when it has the power to direct the financial and operational policies of these companies to obtain benefit from their operations, are fully consolidated from the date that control commences until the date that control ceases. A controlling position is assumed to exist where the Company holds, directly or indirectly, a voting interest exceeding 50%, and where no other shareholder or group of shareholders exercises substantive participating rights which would enable it to veto or to block ordinary decisions taken by the Company. A controlling position also exists where the Company, holding an interest of 50% or less in an entity, possesses control over more than 50% of the voting rights by virtue of an agreement with other investors, power to direct the financial and operational policies of the entity by virtue of a statute or contract, power to appoint or remove from office the majority of the members of the Board of Directors or equivalent management body, or the power to assemble the majority of voting rights at meetings of the Board of Directors or equivalent management body. The Company consolidates special purpose entities which it controls in substance because it has the right to obtain a majority of benefits, or because it retains the majority of residual risks inherent in the special purpose entity or its assets.


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(ii) Transactions eliminated on consolidation

Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.

e) Significant accounting judgments, estimates and assumptions The preparation of these consolidated annual financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. These consolidated annual financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated annual financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, on a prospective basis. The revision may affect current or both current and future periods. Information about critical judgments and estimates in applying accounting policies, and areas where assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following areas: • Asset carrying values and impairment charges • Estimation of asset lives • Recognition of deferred tax assets • Contingencies • Share-based payments • Assessment of the project stage for mineral properties and activities • Estimation of close down and restoration costs and the timing of expenditures • Estimation of environmental cleanup and the timing of expenditure and related accretion • Depletion, depreciation and amortization • Determination of functional currency

f) Presentation and functional currency The Company’s financial statements are presented in Canadian dollars. The Company’s functional and presentation currency is the Canadian dollar. The Company’s subsidiaries’ functional currency is the United States dollar. These annual consolidated financial statements have been translated to the Canadian dollar in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates.

3. Prepaid expenses and sundry receivables

31-Mar-12 31-Dec-11

Trade receivables and other advances $ 172,873 $ 120,155

Prepaid taxes 181,494 -

HST/VAT receivable 103,537 248,157

Proceeds from exercise of warrants/options 150,000 -

Prepaid insurance 17,965 24,511

$ 625,869 $ 392,823 Receivables disclosed above are classified as loans and receivables and are therefore measured at amortized cost.


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4. Exploration and evaluation expenses and engineering studies Exploration and evaluation expenditures and engineering studies expensed immediately in the income statement for the three months ended March 31, 2012 collectively amounted to $7,365,317 (March 31, 2011 - $3,304,542). Exploration and evaluation properties comprise the following:

a) Volta Grande, Para State, Brazil The gold project includes approximately 149,918 hectares in twenty-two Exploration Permits (2011 – 103,169 hectares in twenty-two exploration permits) and 46,749 hectares in twelve Exploration Applications (2011 – 49,906 hectares in ten exploration applications) and is situated in the margin of the Xingu river, some 60 km from the city of Altamira, Para State. Under the agreement, the Company agreed to pay to OCA Mineracao Ltda., an unrelated company whose controlling shareholder is the Tenaris-Confab Group, a total of US$600,000 of which US$12,500 was paid in January 2004 and US$50,000 paid in April 2004 and the outstanding balance was paid in December 2006. OCA Mineracao Ltda. ownership was transferred to the Company in March 2008. The transfer of title to the Volta Grande Property to Belo Sun occurred following the arrangements with Companhia de Pesquisa de Recursos Minerais ("CPRM"), a Brazilian state owned company, whereby the Company has committed to pay CPRM 3,740,000 Reais if a mineable deposit is defined on the Volta Grande Property. As security, the Company purchased a term deposit of 3,740,000 Reais. In March 2008, the Company successfully renegotiated the agreement with CPRM. Under the new terms, CPRM released to the Company 3,525,087 Reais of the total term deposit of 4,273,087 Reais including accrued interest, held in security to cover the Company’s potential debt owed to CPRM. In addition, the Company allocated the balance of the original term deposit that was not released, amounting to 748,000 Reais, to be retained in an interest bearing term deposit to cover future royalty payments. There has been no production at Volta Grande Property thus no royalties payable and no amounts were withdrawn by CPRM. The Company is committed to paying approximately US$1,500,000 to CPRM if a mineable deposit is defined on the property, and to invest a minimum US$1,500,000 at Volta Grande over a two year period. The Company has fulfilled its investment condition on this property.

b) Patrocino, Para State, Brazil

This gold project is situated in the Para State and includes approximately 18,669 hectares (2011 – 18,669 hectares). Pursuant to a signed contract on October 8, 2004 the Company has the right to acquire 100% of the property. Under the terms of the contract, the Company must make 36 monthly payments of US $1,667 and issue 200,000 common shares of the Company to the original owners. The Company is current on these payments and issued 200,000 common shares at $0.10 on June 20, 2005. In addition, the property is subject to a 1.5% net smelter royalty and a sliding scale payment during the first two years of production from the property. The payment ranges from 606 ounces of gold assuming 100,000 ounces of proven and probable reserves to 12,121 ounces of gold assuming 1.2 million proven and probable reserve ounces.


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The Company is currently assessing its options with respect to the project including, but not limited to, joint-venture scenarios, earn-out arrangements, and further development by Belo Sun.

5. Term investment The investment consists of a term deposit of 1,025,291 Reais (CDN$562,475) (December 31, 2011 – 1,005,805 Reais (CDN$548,968)), including accrued interest, which approximates fair value, to fund the potential amounts owing to CPRM. The term deposit matures on April 22, 2013 and bears interest at a floating rate of approximately 9.19% (December 31, 2011 – 10.2%). The Company intends on rolling over the term deposit on maturity because it is security against the potential amount owing to the CPRM (Note 4(a)) and accordingly, management has shown the investment as a long-term asset.

6. Property, plant and equipment

Vehicles

Furniture &

equipment

Mining

equipment

Building

under

construction Land Total

Cost at December 31, 2010 $257,094 $ 178,812 $ 136,237 $ 78,009 $7,267 $ 657,419

Additions 203,859 349,832 74,517 124,357 - 752,565

FX adjustment 10,639 (24,056) 37,900 1,738 354 26,575

Cost at December 31, 2011 471,592 504,588 248,654 204,104 7,621 1,436,559

Additions - 16,539 63,031 10,149 - 89,719

FX adjustment (10,055) (9,875) (3,862) (4,058) (162) (28,012)

Cost at March 31, 2012 461,537 511,252 307,823 210,195 7,459 1,498,266

Accumulated depreciation

Balance as at December 31, 2010 69,250 37,150 33,432 - - 139,832

Charge for the year 53,014 34,160 39,885 - - 127,059

FX adjustment 6,673 4,967 11,339 - - 22,979

Balance as at December 31, 2011 128,937 76,277 84,656 - - 289,870

Charge for the year 17,726 12,026 14,682 - - 44,434

FX adjustment (2,768) (1,429) (1,821) - - (6,018)

Balance at March 31, 2012 $143,895 $ 86,874 $ 97,517 $ - $ - $ 328,286

Net book value as at December 31, 2011 $342,655 $ 428,311 $ 163,998 $ 204,104 $7,621 $1,146,689

Net book value as at March 31, 2012 $317,642 $ 424,378 $ 210,306 $ 210,195 $7,459 $1,169,980 As at March 31, 2011, the Company’s finance leases consist of four vehicles having a net book value of $136,391 (December 31, 2011 - $149,314).


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7. Accounts payable and accrued liabilities

31-Mar-12 31-Dec-11

Mineral properties suppliers and contractors 2,619,760$ 1,782,014$

DNPM Taxes 220,923 219,795

Corporate payables 115,658 112,968

Audit accrual 15,000 50,000

$ 2,971,341 $ 2,164,777 8. Finance leases Finance leases relate to vehicles with lease terms of 1 to 2 years. The Company has options to purchase the vehicles for a nominal amount at the conclusion of the lease agreements. As at March 31, 2012, the finance leases were composed of the following obligations:

2012 46,819

2013 7,778

54,597

less amounts representing interest (10,481)

44,116$

current portion 44,116

long term portion - 9. Share Capital

a) As at March 31, 2012 and December 31, 2011, the Company’s authorized number of common shares was unlimited without par value and an unlimited number of special shares. The special shares have the same features as the common shares with the exception that the special shares take preference over the common shares in the event of liquidation, dissolution or winding up of the Company. The special shares are entitled to the same dividend rights as common shares.


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b) Issued and outstanding share capital

Number of

Shares Amount

Balance, December 31, 2010 149,158,834 40,829,667$

Public offering (i) 45,080,000 51,842,000

Exercise of stock options 2,659,000 1,397,078

Exercise of stock options - value allocation 958,656

Exercise of warrants 10,706,500 3,819,550

Exercise of warrants -value allocation 1,182,098

Value of warrants granted on exercise of broker units - (237,000)

Cost of issue (3,515,942)

Balance, December 31, 2011 207,604,334 96,276,107

Exercise of stock options 275,000 160,750

Exercise of stock options - value allocation 91,117

Exercise of warrants 21,515,600 10,610,850

Exercise of warrants -value allocation 2,231,085

Balance, March 31, 2012 229,394,934 109,369,909$

(i) On March 25, 2011, the Company completed a bought deal financing of 45,080,000 common shares, including the full exercise of the agents’ over-allotment option of 5,880,000 common shares, at a price of $1.15 per common share for gross proceeds of $51,842,000. The Company paid the underwriters a fee of 6% on funds raised.

10. Share-based payments reserves The Company has an ownership-based compensation scheme for executives and employees. In accordance with the terms of the plan, as approved by shareholders at a previous annual general meeting, officers, directors and consultants of the Company may be granted options to purchase common shares at exercise prices determined at the time of grant. The Company has adopted a Floating Stock Option Plan (the “Plan”), whereby the number of common shares reserved for issuance under the Plan is equivalent of up to 10% of the issued and outstanding shares of the Company from time to time. The option vesting terms are determined at the discretion of the Board of Directors. Each employee share option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry.


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Number of

Options

Weighted average

exercise prices

(CAD$)

Value of

options

Number of

Warrants

Weighted average

exercise prices

(CAD$)

Value of

warrants

TOTAL

VALUE

December 31, 2010 9,948,400 $0.45 3,168,085$ 31,556,800 $0.44 3,233,525$ 6,401,610$

Granted 4,922,200 $1.33 4,380,758 610,000 $0.50 237,000 4,617,758

Exercised (2,659,000) $0.53 (958,656) (10,706,500) $0.36 (1,182,098) (2,140,754)

Expired/forfeited (60,000) $1.33 (53,400) (372,500) $0.24 (42,602) (96,002)

December 31, 2011 12,151,600 $0.79 6,536,787$ 21,087,800 $0.49 2,245,825$ $ 8,782,612

Granted 3,470,000 $1.15 2,741,300 587,800 $0.50 293,900 3,035,200

Exercised (275,000) $0.58 (91,117) (21,515,600) $0.49 (2,524,985) (2,616,102)

Expired/forfeited - $0.00 - (160,000) $0.50 (14,740) (14,740)

March 31, 2012 15,346,600 $0.87 9,186,970$ - $0.00 -$ $ 9,186,970

The following share-based payments arrangements were in existence during the current and prior reporting periods:

Options:

Number

outstanding

Number

exercisable Grant date Expiry date

Exercise

price

Expected

volatility

Expected

life (yrs)

Expected

dividend yield

Risk-free

interest rate

250,000 250,000 10-Apr-07 10-Apr-12 $ 0.60 99% 5 0% 4.50%

250,000 250,000 24-Oct-07 24-Oct-12 $ 0.60 81% 5 0% 4.18%

3,794,600 3,794,600 5-Mar-10 5-Mar-15 $ 0.34 100% 5 0% 2.59%

60,000 60,000 2-Jun-10 2-Jun-15 $ 0.45 100% 5 0% 2.68%

1,968,000 1,968,000 29-Jul-10 29-Jul-15 $ 0.36 104% 5 0% 2.36%

50,000 50,000 11-Nov-10 11-Nov-15 $ 0.80 94% 5 0% 2.50%

650,000 650,000 5-Dec-10 5-Dec-15 $ 0.89 94% 5 0% 2.40%

4,854,000 4,854,000 21-Apr-11 21-Apr-16 $ 1.33 94% 5 0% 2.70%

3,470,000 3,470,000 31-Jan-12 31-Jan-17 $ 1.15 94% 5 0% 1.25%

15,346,600 15,346,600

Fair value of share options granted in the period:

During the three months ended March 31, 2012, the Company granted 3,470,000 stock options (March 31, 2011: nil). A value of $2,741,300 was recorded to the statement of comprehensive loss for the three months ended March 31, 2012 (March 31, 2011: $nil) related to these stock options. The weighted average grant date fair value of the share options granted during the three month period ended March 31, 2012 is $0.79 (2011: $nil). Options were priced using the Black-Scholes option-pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non - transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility over the past 5 years. The expected life of the option was calculated based on the history of option exercises.


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11. Operating segments

Geographical information

The Company operates in Canada, Barbados and Brazil. The Company’s information about its assets by geographical location are detailed below.

Current Assets

Property, Plant

and Equipment

Other long-term

assets TOTAL ASSETS

March 31, 2012

Canada 17,408,447$ 7,742$ -$ 17,416,189$

Barbados 10,745 - - 10,745

Brazil 19,120,860 1,162,238 562,475 20,845,573

36,540,052$ 1,169,980$ 562,475$ 38,272,507$

December 31, 2011

Canada 12,439,612$ 9,325$ -$ 12,448,937$

Barbados 1,553 - - 1,553

Brazil 20,367,603 1,137,364 548,968 22,053,935

32,808,768$ 1,146,689$ 548,968$ 34,504,425$ 12. Loss per share Basic loss per share is calculated by dividing the loss available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding share options and warrants, in the weighted average number of common shares outstanding during the period. In the Company’s case, diluted loss per share is the same as basic loss per share as the effects of including all outstanding options and warrants would be anti-dilutive.

13. Financial instruments Financial assets and financial liabilities as at March 31, 2012 and December 31, 2011:

Cash and cash equivalents $ - $ - $ 35,914,183 $ 35,914,183

Sundry receivables - 253,537 - 253,537

Term investment - - 562,475 562,475

Accounts payable and accrued liabilities 2,971,341 - - 2,971,341

Finance lease 44,116 - - 44,116

Total

Assets /(liabilities) at

fair value through

profit/lossMarch 31, 2012 Other liabilities

Loans and

receivables


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Cash and cash equivalents $ - $ - $ 32,415,945 $ 32,415,945

Sundry receivables - 120,155 - 120,155

Term investment - - 548,968 548,968

Accounts payable and accrued liabilities 2,164,777 - - 2,164,777

Finance lease 66,745 - - 66,745

Total

Assets /(liabilities) at

fair value through

profit/lossDecember 31, 2011 Other liabilities

Loans and

receivables

At March 31, 2012, the Company’s financial instruments that are carried at fair value, consisting of cash and cash equivalents and term investment, have been classified as Level 1 within the fair value hierarchy. The Company's risk exposures and the impact on the Company's financial instruments are summarized below. There have been no significant changes in the risks, objectives, policies and procedures for managing risk during the three months ended March 31, 2012 and 2011. Credit risk Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s primary counterparty related to its cash and cash equivalents and term investment carry an investment grade rating as assessed by external rating agencies. The Company maintains all of its cash and cash equivalents and term investment with major Canadian, British, US and Brazilian financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits. Sundry receivables consist of GST/HST input tax receivables and management believes that the credit risks associated with these amounts are remote. The Company’s maximum exposure to credit risk at the balance sheet date is the carrying value of cash and cash equivalents, term investment and sundry receivables.

Liquidity risk The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances. The Company continuously monitors and reviews both actual and forecasted cash flows, and also matches the maturity profile of financial assets and liabilities. As at March 31, 2012, the Company had current assets of $36,540,052 to settle current liabilities of $3,022,548. Market risk (a) Interest rate risk The Company’s cash equivalents are subject to interest rate cash flow risk as they carry variable rates of interest. The Company’s interest rate risk management policy is to purchase highly liquid investments with a term to maturity of one year or less on the date of purchase. Based on cash and cash equivalent balances on hand at March 31, 2012, a 0.1% change in interest rates could result in a corresponding change in net loss of approximately $36,000 (December 31, 2011 - $32,000).


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(b) Currency risk As the Company operates on an international basis, foreign exchange risk exposures arise from transactions and balances denominated in foreign currencies. The Company’s foreign currency risk arises primarily with respect to the United States dollar and Brazilian Reais. Fluctuations in the exchange rates between these currencies and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company does not engage in any hedging activity to mitigate this risk. A strengthening of $0.01 in the United States dollar against the Brazilian Reais would have decreased net income by approximately $306,000 for the three months ended March 31, 2012 (March 31, 2011 - $3,000). A strengthening of $0.01 in the Canadian dollar against the United States dollar would have decreased accumulated other comprehensive income by approximately $168,000 for the three months ended March 31, 2012 (March 31, 2011 - $2,000). At March 31, 2012, one Canadian dollar was equal to 1.0025 United States dollars (March 31, 2011 – 1.0314) and one Canadian dollar was equal to 1.8228 Brazilian Reais (March 31, 2011 – 1.5762).

(b) Price risk The Company will be exposed to price risk with respect to commodity prices, specifically gold. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company. The Company’s future operations will be significantly affected by changes in the market prices of these commodities. Prices fluctuate on a daily basis and are affected by numerous factors beyond the Company’s control. The supply and demand for gold, the level of interest rates, the rate of inflation, investment decisions by large holders of gold and stability of exchange rates can all cause significant fluctuations in prices. Such external economic factors may in turn be influenced by changes in international investment patterns and monetary systems and political developments.

14. Capital management The Company manages and adjusts its capital structure based on available funds in order to support the acquisition, exploration and development of mineral properties. The capital of the Company consists of common shares, warrants and options. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business. The properties in which the Company currently has an interest are in the exploration and development stage; as such the Company is dependent on external financing to fund its activities. In order to carry out planned exploration and development, and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no significant changes in the Company's approach to capital management during the three months ended March 31, 2012 and 2011. The Company is not subject to externally imposed capital requirements.


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15. Related party disclosures The condensed interim consolidated financial statements include the financial statements of the Company and the subsidiaries at their respective ownership listed in the following table.

Belo Sun Mining (Barbados) Corp. Barbados

Belo Sun Mineracao Ltda Brazil

Intergemas Mineracao e

Industrializacao Ltda Brazil

Aubras Mineracao Ltda Brazil

100

Country of incorporation % equity interest

100

98

100

During the period, the Company entered into the following transactions in the ordinary course of business with related parties that are not subsidiaries of the Company.

2012 2011

2227929 Ontario Inc. $ 67,784 $ 75,364

Forbes & Manhattan, Inc. 75,000 98,387

Falcon Metais Ltda. 32,380 20,949


Purchases of goods/services

The Company shares office space with other companies who may have common officers and directors. The costs associated with this space are administered by 2227929 Ontario Inc. Mr. Stan Bharti, the Chairman of the Company, is the Executive Chairman of Forbes and Manhattan, Inc., a corporation that provides administrative services to the Company. Forbes and Manhattan, Inc. charges a monthly consulting fee of $25,000. Mr. Helio Deniz, Vice President of Exploration for the Company, is an officer of Falcon Metais Ltda., a company providing exploration and administration services in Brazil. The following balances were outstanding at the end of the reporting period:

31-Mar-12 31-Dec-11 31-Mar-12 31-Dec-11

2227929 Ontario Inc. $ 11,128 $ 72,209 $ 3,468 $ 14,893

Directors of the Company - - 43,498 72,936

Falcon Metais Ltda. 98,318 29,384 - -

Amounts owed by related

parties

Amounts owed to related

parties

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognized in the current or prior periods for bad or doubtful debts in respect of the amounts owed by related parties.


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Compensation of key management personnel of the Company The remuneration of directors and other members of key management personnel during the period were as follows:

2012 2011

Short-term benefits 233,917$ 840,000$

Share-based payments 1,975,000 -


In accordance with IAS 24 Related Party Disclosures, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. 16. Commitments and contingencies

(a) Long Term Investment

Under a successfully renegotiated agreement with CPRM (Note 5) in March 2008, the Company maintains an interest bearing term deposit to cover the future royalty payments, starting March 31, 2008. There has been no production at Volta Grande Property thus no royalties were payable and no amounts were withdrawn by the CPRM.

(b) The Company is party to certain management contracts. These contracts require that additional payments of up to $3,000,000 be made upon the occurrence of certain events such as a change of control. As the likelihood of these events taking place is uncertain, the contingent payments have not been reflected in these consolidated financial statements. Minimum commitments remaining under these contracts were approximately $566,000 all due within one year.

(c) The Company’s mining and exploration activities are subject to various federal, provincial and

international laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

17. Income tax

The current tax liability of $7,091 (December 31, 2011 - $7,091) represents amount of income taxes payable in respect of current and prior periods. An amount of $7,091 is recorded as deferred taxes.


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18. Subsequent events

Subsequent to the end of the quarter, 300,000 options were exercised for gross proceeds of $194,500 and 250,000 were granted.

CONDENSED INTERIM CONSOLIDATED FINANCIAL … · 2020. 12. 21. · 2 BELO SUN MINING CORP. NOTICE OF...

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